Human Resources - Unit 4 - QQI Level 6 PDF

Human Resources QQI Level 6 Unit 4 Human Resources - Level 6 - Unit 4 6N3750 Human Resources QQI Level 6...

Human Resources QQI Level 6 Unit 4 Human Resources - Level 6 - Unit 4 6N3750 Human Resources QQI Level 6 6N3750 Unit 4: Management, Motivation, Performance and Reward Systems All rights reserved No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any format by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the proprietor and copyright owner of the course. Printed and published in Ireland By The Open College Written by Marianne Byrne Licensed holders of the copyright and publication rights for Ireland QQI Reg: 38365F Copyright © 2020/21 The Open College – Tutor – Marianne Byrne 1 Human Resources - Level 6 - Unit 4 6N3750 Contents Management, Motivation, Performance and Reward Systems.......................................... 4 Introduction........................................................................................................................... 4 Management.................................................................................................................... 5 Defining Management........................................................................................................... 5 Functions of Management..................................................................................................... 5 Motivation....................................................................................................................... 6 Defining Motivation............................................................................................................... 6 Motivation and behaviours.................................................................................................... 7 Motivation and influences..................................................................................................... 8 Internal process..................................................................................................................... 8 Money as a motivator............................................................................................................ 9 HR’s Contribution to Motivation..................................................................................... 11 The Theorists Research on Motivation............................................................................ 12 Frederick Taylor................................................................................................................... 12 Elton Mayo........................................................................................................................... 14 Abraham Maslow................................................................................................................. 15 Frederick Herzberg............................................................................................................... 18 Douglas McGregor............................................................................................................... 19 Extrinsic and Intrinsic Motivating Factors........................................................................ 20 Intrinsic verses extrinsic....................................................................................................... 21 How Does Motivation Apply in Practice?........................................................................ 22 Conclusion............................................................................................................................ 24 Performance Management............................................................................................. 24 The aims of performance management.............................................................................. 24 Public and private sector PM............................................................................................... 25 A Performance Management System.................................................................................. 25 360° Performance Management......................................................................................... 26 A Review/Appraisal System............................................................................................ 26 Appraisal mistakes............................................................................................................... 27 Separation of appraisal and pay.......................................................................................... 28 Evaluate the Role of Performance Management as a Motivator...................................... 30 Monitor performance.......................................................................................................... 30 Copyright © 2020/21 The Open College – Tutor – Marianne Byrne 2 Human Resources - Level 6 - Unit 4 6N3750 Performance management is key to competitiveness........................................................ 30 Scoring procedures.............................................................................................................. 31 Why pay for performance?.................................................................................................. 31 Individual pay for performance........................................................................................... 32 Group incentives.................................................................................................................. 33 Pay-for-performance systems.............................................................................................. 34 CIPD listing of core benefits................................................................................................. 35 Reward Management..................................................................................................... 38 Definition of reward systems............................................................................................... 38 Equity and participation....................................................................................................... 39 The aim of reward systems.................................................................................................. 39 Common reward – pay – methods:..................................................................................... 39 Other benefits...................................................................................................................... 40 What are the Elements of a Total Rewards System?........................................................ 41 Introduction......................................................................................................................... 41 Reward types....................................................................................................................... 42 Salary and benefits............................................................................................................... 42 The work experience............................................................................................................ 42 Advantages........................................................................................................................... 43 Two studies.......................................................................................................................... 43 Considerations..................................................................................................................... 44 Reward systems theory and reality..................................................................................... 44 Rewards and employee satisfaction.................................................................................... 44 Rewards and motivation...................................................................................................... 44 Compensation reviews......................................................................................................... 45 The Role of Non-Monetary Reward Systems................................................................... 46 What Role Does Job Evaluation Play?............................................................................. 48 Examine the job functions and requirements..................................................................... 49 Determine the value of the job to the organisation............................................................ 49 Job ranking – most common method of evaluating............................................................ 49 Competence based.............................................................................................................. 50 Summarising motivation, performance and rewards.......................................................... 50 Bibliography................................................................................................................... 52 Copyright © 2020/21 The Open College – Tutor – Marianne Byrne 3 Human Resources - Level 6 - Unit 4 6N3750 Management, Motivation, Performance and Reward Systems Introduction Welcome to Unit 4. This Unit is concerned with management, motivation, performance and reward systems. An essential part of running any business lies in how it is managed. Ever since the beginning of time, when people began forming into groups, in order to accomplish their aim, a leader would always be appointed. Students of human resource management often complain about having to study theorist’s views going back to the Industrial Revolu- tion in the 18th Century. However, in order for us to get a perspective on management, it is appropriate to start with those theorists who studied operational management, motiva- tional management and scientific management, amongst others. Management and motivation are closely linked, because in order to get the best from em- ployees, it is essential to motivate them. Then the question is, how are people motivated within an organisation? The answer has to lie in various types of rewards, what we call a re- ward system. When you have studied this Unit you will have a good insight into management in organisa- tions and of the large part that the theorists played in looking at people working in organisa- tions, particularly their motivations, behaviours and how motivating employees was discov- ered. “Coming together is a beginning; keeping together is progress; working together is success” Henry Ford (1863-1947). Copyright © 2020/21 The Open College – Tutor – Marianne Byrne 4 Human Resources - Level 6 - Unit 4 6N3750 Management Defining Management Harold Koontz and Heinz Weihrich produced a number of books on management. Their ex- planation in defining management is as follows; "Management is the process of designing and maintaining an environment in which individ- uals, working together in groups, efficiently accomplish selected aims.” 1. As managers, people carry out the managerial functions of planning, organising, staffing, leading, and controlling. 2. Management applies to any kind of organisation. 3. It applies to managers at all organisational levels. 4. The aim of all managers is the same: to create a surplus. 5. Managing is concerned with productivity; this implies effectiveness and efficiency. Functions of Management The process of management can be better understood by breaking it down into the five basic functions of a manager – planning, organising, staffing, leading and controlling. All the management concepts, principles, theories and techniques, can be grouped under these five functions. (Koontz and Weinrich, Management, 9th edition (1988)) Planning: Planning is covered in Unit 2. In essence, you will recall it is about setting objec- tives and planning a process to achieve these objectives or goals. Organising: The organisation must be structured in such a way that everyone knows what they are supposed to be doing at any given time. Copyright © 2020/21 The Open College – Tutor – Marianne Byrne 5 Human Resources - Level 6 - Unit 4 6N3750 Staffing: This is covered in Unit 3 – Recruitment and Selection. Identifying the requirements and acting on this. Leading: Leading and influencing the people in the organisation. In school, you will have heard the expression ‘follow the leader’. It works the same in organisations. The person leading the company should have the charisma and stance necessary for the staff to follow. Controlling: In organisations, one of the main control mechanisms there is are policies. It is a way of keeping all activities in line. Control is also about seeing conflict or anticipating con- flict and being in a position to handle it in a proactive way. Motivation Defining Motivation Dictionary meanings for motivation tend to be circular insofar as each makes reference to the verb "to motivate”. In simple terms, motivation is the process of boosting the morale of employees to encourage them to willingly give their best in accomplishing assigned tasks. Employee motivation is key to achieving extraordinary results. An organisation cannot suc- ceed at leadership if the employees are de-motivated or disgruntled. Motivation is a concept easy to understand, but difficult to define, because of the variety of interpretations of what it conveys. Managers should be aware that human performance is closely linked to motivation. Motivation involves the level of energy that a person uses as they strive to attain a goal. There is a link between satisfaction and productivity. Lack of motivation leads to absentee- ism, accidents, high turnover and industrial relations problems. Copyright © 2020/21 The Open College – Tutor – Marianne Byrne 6 Human Resources - Level 6 - Unit 4 6N3750 Motivation and behaviours Let us think for a moment that a person or people are in the process of setting up a com- pany. They have been in companies as employees for a number of years, then accountant A asks business executive B and marketing man C to join forces. The company is very busy and they employ, after a few years, up to thirty staff. They have never discussed motivation or indeed, they may not know the concept of motivation. The staff are very happy, manage- ment are happy, profits are shooting up. Why would a HR practitioner come in and start in- troducing motivation? That is a scenario worth thinking about. If the picture is exactly as explained, how much more beneficial it would be if there was an incremental salary scale, a bonus at Christmas, a pension scheme, flexible working hours, etc, etc. the list is endless. Now you are thinking, yes of course these employees would benefit from all these extras and without doubt they would perform better. But what do we call these extras, we call them motivators. So, therein lies the answer. Every human is motivated by something. Motivation is an internal state that directs individ- uals towards certain goals and objectives. Motivation is highly complex and personal needs differ greatly from person to person, even in the same person over time. Motivation is what induces a person to act. There are many theories on motivation which are usually categorised into two basic types, that is, process and content. Process theories: Is how the process of motivation takes place. Goals reached that motivate the individual. Content theories: Otherwise known as ‘needs’ theories, focus on identifying what motivates people. It could be money, job security, need for achievement. When the theorists are dis- cussed further on, you will read more about this. Copyright © 2020/21 The Open College – Tutor – Marianne Byrne 7 Human Resources - Level 6 - Unit 4 6N3750 Motivation and influences This linear definition shows that motivation is inherently linked to behaviour causation, but seems to refer to several things: firstly, to forces, stimuli or influences that cause behav- iours; secondly, to processes that provide or activate those stimuli; and, thirdly, to the con- dition of being or feeling impelled by those stimuli to act. In perspective though, those forces, stimuli or influences are normally called motivators, and are understood as triggers of motivation, rather than as motivation itself. The act or process of motivating seems to also refer to a trigger in the sense of an initial force or energy that helps quick-start motivation or helps maintain it. In brief, motivation can be defined as an internal process of being or feeling impelled to act; thus, a process which causes behaviour. This internal process is triggered or initiated by in- ternal or external stimuli, such as drives, desires, goals, incentives or threats. Myers (1996), defines motivation as “a need or desire that serves to energise behaviour and to direct it towards a goal”. He is talking about stimuli which trigger the motivation process. When Hawkins (1993), defines it as “what drives or induces a person to behave in a particu- lar fashion, the internal force which initiates, directs, sustains and terminates all important activities. It influences the level of performance, the efficiency achieved and the time spent on an activity”, he also is referring to stimuli that trigger the motivational process. He identifies properties of motivation such as being an internal process, with different roles in influencing behaviours (such as initiating, directing, sustaining or terminating it), and with different degrees of expression at the level of intensity, quality and speed in which behav- iours are carried out. Internal process By now, you may be feeling confused by the definitions, that there is a contradiction in per- spectives in the above definitions. Most of the writers agree in defining motivation as moti- vators, while here let’s define it as an internal process. Copyright © 2020/21 The Open College – Tutor – Marianne Byrne 8 Human Resources - Level 6 - Unit 4 6N3750 To disentangle this potential conflict, let’s use a mechanical example, such as an aircraft or a car. Fuel represents a motivator in those systems. Indeed, the aircraft won’t fly or the car won’t go without fuel. However, a fully loaded aircraft or car won’t go either on the premise of having fuel alone. Even if fully loaded, that aircraft will continue sitting on the tarmac. What causes the aircraft to move is not the fuel, but the combustion process in the engines, which creates the necessary force for moving the aircraft. The combustion process is what “motivates”, what “causes” the aircraft to move, not the fuel. However, fuel is what the en- gines need in order to start and maintain that combustion process. It is the process that transforms fuel into mechanical displacement that will “cause” the aircraft to move. (The above was taken from the Wiki of Science Team.com) Money as a motivator How important is money as a motivator? It is widely accepted that poor or low pay acts as a de-motivator. Someone who feels undervalued or under-paid may soon leave to find better- paid employment. However, it is less clear that paying people more results in higher motivation levels. For most people, motivation (the will to work) comes from ‘within’. More money can help us feel better about our work, but it is unlikely to encourage us to work harder or to a higher standard. In regard to this and with slight contradiction, is Adrian Furnham, Professor of Psychology at University College, London, who stated that the concept that better paid people are more productive and happy, does not tie in with the evidence found in the workplace. Professor Furnham provided the following four key reasons that money is much more likely to be a cause of dissatisfaction, rather than of satisfaction: Copyright © 2020/21 The Open College – Tutor – Marianne Byrne 9 Human Resources - Level 6 - Unit 4 6N3750 Money as a de-motivator: There is no simple correlation between pay and performance. Perceived low pay often leads to considerable dissatisfaction and de-motivation, but not vice versa. The effects of any pay increases will very soon wear off and any improvements are likely to be temporary. Absolute salary verses comparative salary: If one’s pay increases significantly, but in con- cert with the rest of the work group, there is likely to be little change in behaviour. This cru- cial factor relates to an essential problem associated with performance related pay. If em- ployees believe, with or without evidence, that they are not equitably and fairly paid, they will become de-motivated. Money is not everything: Employees are often happier with more time off, or greater job security, and are prepared to trade these for money. Essentially, once employees have enough, they grow weary of the game. Taxation: When taxes eat heavily into pay increases, then motivation benefits become di- luted. Efficiencies and improvements need to be measured, processes understood, goals/targets set and achievements rewarded. If there is no clear relationship between the effort ex- tended, and rewards received, either by individuals or by teams, then there is little point in implementing incentives encouraging employees to be more productive. Copyright © 2020/21 The Open College – Tutor – Marianne Byrne 10 Human Resources - Level 6 - Unit 4 6N3750 HR’s Contribution to Motivation Michael Armstrong and Stephen Taylor (2014) 13th edition of HR Management Practice, have listed a number of motivation ‘exercises’ that they consider to be HR’s contribution to motivation. Here is a summary of these points: Avoid concentrating on a strategy that does not support individual differences. Encourage the development of performance management, agree expectations and recognise accomplishments (performance management as a motivator is discussed further on). Develop a reward system linked to financial and non-financial rewards, paying par- ticular attention to recognition as a means of motivation. Pay attention to job de- sign. Do not consider that a performance related pay scheme is going to work straight off. It needs careful handling. Be involved in job design and consider factors that affect motivation. Job enrich- ment, job variety, decision making responsibility, individual being in control when carrying out their work. Provide facilities for learning. Use a PDP (Personal Development Plan) as well as for- mal training, career development, etc. Advise on the development of a culture that supports processes of valuing and re- warding employees. Devise competency frameworks, focusing on leadership qualities, behaviours ex- pected of managers and team leaders. If there is leadership potential, tap in to this. Conduct leadership development programmes. Make sure people are given the scope to achieve. Give feedback on what they must do to achieve more. Copyright © 2020/21 The Open College – Tutor – Marianne Byrne 11 Human Resources - Level 6 - Unit 4 6N3750 My comments on the above would be that the best example of all is giving good example. If HR is a good communications department, it will reflect on the rest of the company. People will argue that career planning with employees is assisting them to move to higher levels in other companies. The other side of this argument is giving and receiving. What you give you get back and a higher more motivated calibre will surface all around. It has been said that for most of us, by the time we die, we have only discovered 25% of our potential talents. The Theorists Research on Motivation The masters in the subject of managing people in organisations and what the motivators are, we call the Theorists. Here are some famous theorists; Taylor, Mayo, Maslow, Herzberg and McGregor. There are a number of different viewpoints regarding workers’ motivation. The most commonly held views or theories, are discussed below and have been developed over the last 100 years or so. Frederick Taylor Frederick Winslow Taylor (1856 – 1915) was an American mechanical engineer who sought to improve industrial efficiency. He was regarded as the father of scientific management and was one of the first management consultants. Taylor thought that by analysing work, the "One Best Way" to do it would be found. He is most remembered for developing the stop- watch time study, which, combined with Frank Gilbreth's motion study methods, later be- came the field of time and motion study. He would break a job into its component parts and measure each to the hundredth of a mi- nute. One of his most famous studies involved shovels. He noticed that workers used the same shovel for all materials. He determined that the most effective load was 21½ lbs. and found or designed shovels for each material that would scoop up that amount. He was gen- erally unsuccessful in getting his concepts applied and was dismissed from Bethlehem Steel. Copyright © 2020/21 The Open College – Tutor – Marianne Byrne 12 Human Resources - Level 6 - Unit 4 6N3750 Nevertheless, Taylor was able to convince workers who used shovels (and whose compensa- tion was tied to how much they produced), to adopt his advice about the optimum way to shovel by breaking the movements down into their component elements and recommend- ing better ways to perform these movements. It was largely through the efforts of his disci- ples (most notably H.L. Gantt), that industry came to implement his ideas. Moreover, the book he wrote after parting company with Bethlehem Steel, Shop Management, was a fa- mous best seller. He put forward the idea that workers are motivated mainly by pay. His ‘Theory of Scientific Management’ argued the following: Workers do not naturally enjoy work and so need close supervision and control. Therefore, managers should break down production into a series of small tasks. Workers should then be given appropriate training and tools so they can work as efficiently as possible on one set task. Workers are then paid according to the number of items they produce in a set period of time (piece-rate pay). As a result, workers are encouraged to work hard and maximise their productivity. Taylor’s methods were widely adopted as businesses saw the benefits of increased produc- tivity levels and lower unit costs. The most notable advocate was Henry Ford who used them to design the first ever production line, making Ford cars. This was the start of the era of mass production. Taylor’s approach has close links with the concept of an autocratic management style (managers make all the decisions and simply give orders to those below them) and this concept is similar to Macgregor’s Theory X that managers must keep tight control and workers are viewed as lazy and wish to avoid responsibility. See McGregor further on. However, workers soon came to dislike Taylor’s approach, as they were only given boring, repetitive tasks to carry out and were being treated little better than human machines. Copyright © 2020/21 The Open College – Tutor – Marianne Byrne 13 Human Resources - Level 6 - Unit 4 6N3750 Firms could also afford to lay off workers according to productivity levels. This led to an in- crease in strikes and other forms of industrial action by dissatisfied workers. Elton Mayo Elton Mayo (1880 – 1949), believed that workers were not just concerned with money, but could be better motivated by having their social needs met whilst at work (something that Taylor ignored). He introduced the Human Relation school of thought, which focused on managers taking more of an interest in the workers, treating them as people who have worthwhile opinions and realising that workers enjoy interacting together. Mayo conducted a series of experiments at the Hawthorne factory of the Western Electric Company in Chicago. He isolated two groups of women workers and studied the effect on their productivity levels by changing factors such as lighting, heating and other working con- ditions. He expected to see productivity levels decline as the lighting and other conditions became progressively worse. What he actually discovered surprised him. Whatever changes in lighting, etc., the productivity levels of the workers improved or remained the same. From this, Mayo concluded that workers are best motivated by: Better communications between managers and workers. (Hawthorne workers were consulted over the experiments and also had the opportunity to give feedback). Greater manager involvement in employee’s working lives. (Hawthorne workers re- sponded to the increased level of attention they were receiving). Working in groups or teams. (Hawthorne workers did not previously regularly work in teams). In practice therefore, businesses should re-organise production to encourage greater use of team working and introduce personnel departments (now HR) to encourage greater man- ager involvement in looking after employees’ interests. His theory most closely fits in with a paternalistic style of management. Copyright © 2020/21 The Open College – Tutor – Marianne Byrne 14 Human Resources - Level 6 - Unit 4 6N3750 Abraham Maslow The ideas of Abraham Maslow (1908-1970), a humanistic psychologist, have had a consider- able influence on management thinking since the late 1940s. Like Carl Rogers, another hu- manistic thinker, Maslow had a positive view of human nature, a belief in the individual’s potential for personal growth – what they called self-actualisation. Maslow and Frederick Herzberg (1923-2000), introduced the Neo-Human Relations School in the 1950s, which focused on the psychological needs of employees. Maslow put forward a theory that there are five levels of human needs which employees need to have fulfilled at work. All of the needs are structured into a hierarchy and only once a lower level of need has been fully met, would a worker be motivated by the opportunity of having the next need up in the hierarchy satisfied. For example, a person who is hungry will be motivated to achieve a basic wage in order to buy food, before worrying about having a secure job contract or the respect of others. A business should therefore offer different incentives to workers in order to help them fulfil each need in turn and progress up the hierarchy (see below). Managers should also recog- nise that workers are not all motivated in the same way and do not all move up the hierar- chy at the same pace. They may, therefore, have to offer a slightly different set of incentives from worker to worker. Copyright © 2020/21 The Open College – Tutor – Marianne Byrne 15 Human Resources - Level 6 - Unit 4 6N3750 According to Maslow there are five basic levels of human needs: 1. Physiological needs: We are motivated to satisfy needs that ensure our physical survival. Needs in this group include food, water, air, shelter and clothing. Most people have satisfied their physical needs, allowing them to concentrate on higher level needs. For some though, physiological needs are dominant and are the big- gest needs in their lives. 2. Safety needs: Once physiological needs are met, we can concentrate on bringing safety and security to our lives. Safety and security needs include, order, stability, routine, familiarity, control over one’s life and environment, certainty and health. 3. Social needs: Or love and belonging needs. Belonging to an organisation or feeling part of an organisation. These needs also include love, affection and acceptance. People look for these needs in relationships with other people and are motivated by these needs. 4. Esteem needs: People have a need for stable, firmly based, usually high evaluation of themselves for self-respect or self-esteem and for the esteem of others. Copyright © 2020/21 The Open College – Tutor – Marianne Byrne 16 Human Resources - Level 6 - Unit 4 6N3750 These needs may therefore be classified into two subsidiary sets. These are, first, the desire for strength, achievement, and adequacy, mastery of competence, confi- dence, independence and freedom. Second, we have what we call the desire for reputation or prestige (defining it as respect from other people), status, fame, glory, dominance, importance, recognition, dignity or appreciation. 5. Need for self-actualisation: This level of hierarchy is concentrated on an individual being able to reach their full potential as a human being. Once someone has satis- fied the first four levels of needs, then they have the ability to concentrate on func- tioning to their highest potential. But even if all these needs are satisfied, we may often still expect that a new discontent and restlessness will soon develop, unless the individual is doing what they are fitted for. Musi- cians must play music, artists must paint, if they are to be at peace with themselves. They must be true to their own nature. The first four needs are what we call deficiency needs, because they come from things we are lacking. These needs can be met only by external sources, by the environment, people or things going on around us. Self-actualisation is a growth need. This doesn’t just address what we are lacking in our lives, but it gives us room to grow and develop as individuals. This need is always intrinsi- cally motivated, because we do it out of pure enjoyment and desire to grow. Maslow does explain that self-actualisation is rarely achieved, even as adults. When we are children, teachers must make sure they have satisfied their deficiency needs in order to move on to their growth need. Intrinsic motivation will not occur until they are well fed, safe in their environment, and can love and respect the teachers and their classmates. From there on, motivation will be a breeze. Copyright © 2020/21 The Open College – Tutor – Marianne Byrne 17 Human Resources - Level 6 - Unit 4 6N3750 Frederick Herzberg Frederick Herzberg (1923-2000) had close links with Maslow and believed in a two-factor theory of motivation. He argued that there were certain factors that a business could intro- duce that would directly motivate employees to work harder (motivators). However, there were also factors that would de-motivate an employee if not present but would not in themselves actually motivate employees to work harder (hygiene factors). Factors leading to dissatisfaction were found to do with conditions of work – company pol- icy and administration, technical supervision, salary, interpersonal relations and physical working conditions. Herzberg called these the hygiene or maintenance factors. Motivators are more concerned with the actual job itself. For instance, how interesting the work is and how much opportunity it gives for extra responsibility, recognition and promo- tion. Hygiene factors are factors which ‘surround the job’ rather than the job itself. For example, a worker will only turn up to work if a business has provided a reasonable level of pay and safe working conditions, but these factors will not make him work harder at his job once he is there. Importantly, Herzberg viewed pay as a hygiene factor which is in direct contrast to Taylor who viewed pay, and piece-rate particularly, as motivation factors. Herzberg believed that businesses should motivate employees by adopting a democratic ap- proach to management and by improving the nature and content of the actual job through certain methods. Some of the methods managers could use to achieve this are: Job enlargement – workers being given a greater variety of tasks to perform (not necessarily more challenging), which should make the work more interesting. Job enrichment - involves workers being given a wider range of more complex, in- teresting and challenging tasks surrounding a complete unit of work. This should give a greater sense of achievement. Empowerment - delegating more power to employees to make their own decisions over areas of their working life. Copyright © 2020/21 The Open College – Tutor – Marianne Byrne 18 Human Resources - Level 6 - Unit 4 6N3750 Douglas McGregor Douglas McGregor (1906-1964) is famous for his X and Y theories. His theory was to ques- tion how managers see themselves in relation to others. There was not a ‘good’ and ‘bad’ type of manager, but different in their approach. Theory X (also called stick and carrot approach) implies that managers must control employ- ees’ work tightly, supervise them closely/give simple repetitive tasks. The key motivators were reward and punishment. This approach would indicate that people are normally lazy, inefficient and wasteful. They will avoid work if they can. So therefore, there must be a bit of coercion, direction, control, etc. on behalf of the manager. This, in his opinion, was what employees wanted. They did not want to have to make any decisions, but preferred being controlled by someone else. They would have little ambition, and job security was really their main focus. This would be similar to Maslow’s safety needs in his ‘hierarchy of needs’. Theory Y on the other hand, suggests that the manager should seek to create an environ- ment that allows employees to contribute to the limits of their ability and encourage self- direction. Their reward is the freedom to do difficult and challenging tasks. The mental and physical effort comes as naturally to workers as play or rest. People will ex- ercise a level of self-control, working towards objectives of the organisation, actively seek- ing responsibility. They are in other words, ‘committed’ to the cause. Theory Y tends to be more popular in today’s organisations. However, Theory X is not to be discounted, it is a very popular for a manager to get what he wants in some circumstances. To bring about more desirable motivation, management must seek to create a supportive environment that emphasises honesty, feedback, fairness, performance. (If you want to study the Theorists in more detail, you will find information in the HR man- agement books listed in the bibliography.) Copyright © 2020/21 The Open College – Tutor – Marianne Byrne 19 Human Resources - Level 6 - Unit 4 6N3750 Extrinsic and Intrinsic Motivating Factors Intrinsic Motivation: When discussing Maslow earlier, ‘intrinsic motivation’ was described as not occurring until they are well fed and in a safe environment. Intrinsic motivation is something that energises, directs, and sustains behaviours. Internal desires to perform a particular task people do. Intrinsic motivation refers to motivation that comes from inside an individual, rather than from any external or outside rewards, such as money or grades. They perform certain activi- ties because it gives them pleasure, develops a particular skill, or it's morally the right thing to do. Intrinsic motivation reflects the desire to do something because it is enjoyable. If we are intrinsically motivated, we would not be worried about external rewards such as praise or awards. If we are intrinsically motivated, the enjoyment we experience would be sufficient for us to want to perform the activity in the future. Intrinsically motivated employees are bound to do much better in organisations because they are willing and eager to learn new material. Their learning experience is more meaningful, and they go deeper into the project to fully understand it. On the other hand, extrinsically motivated employees may have to be bribed to perform the same tasks. Extrinsic Motivation: Factors external to the individual and unrelated to the task they are performing. Extrinsic motivation reflects the desire to do something because of external re- wards such as awards, money, bonus, moving up the ladder, praise etc. People who are ex- trinsically motivated may not enjoy certain activities. They may only wish to engage in cer- tain activities because they wish to receive some external reward. There are many possible extrinsic motivation examples. The writer who only writes poems to be submitted to poetry contests, would be one example of extrinsic motivation. The person who dislikes sales but accepts a sales position because he or she desires to earn an above average salary, is another example of extrinsic motivation. Copyright © 2020/21 The Open College – Tutor – Marianne Byrne 20 Human Resources - Level 6 - Unit 4 6N3750 A third example of extrinsic motivation, is selecting an area of study in college based on salary and prestige, rather than personal interest in the subject matter. Intrinsic verses extrinsic Supervisors in the workplace may also be interested in ways to increase intrinsic motivation. The ideal employee may be one who is self-motivated and does not require constant super- vision. Intrinsically motivated employees may be less likely to be late for work. They also may be more likely to excel at their jobs. It is possible that supervisors may increase intrinsic motivation by allowing employees to have greater autonomy, making the workplace fun, or encouraging creativity. Motivation is about what makes people tick, what makes people act or behave in a particu- lar way. On a basic level, people are motivated towards a desired outcome, such as congrat- ulations from their manager for a job well done, or are motivated to avoid an undesired out- come, such as a rollicking from the boss or being late for work. Our motives for behaving the way we do are many and varied. Whether you stay behind at work to finish a report for your manager will depend on a whole set of complex variables. Your predication as to what will happen if you don’t finish the report today, what your men- tal state is at the time - exhausted or fired with enthusiasm, what arrangements have you made at home for being late, and so on. Many times a day, consciously or unconsciously, we are making decisions, calculations as to where to invest our energy. Some of the factors which affect this calculation lie outside the individual – they are extrinsic. In the above example, where you need to stay back at work to finish a report for your manager, the extrinsic factors are, the pressure from the manager to finish the report, and the arrangements you have made at home. Other factors lie within the individual – they are intrinsic – such as how you feel about the pressure from your manager and the arrangement you have made at home, and how you view yourself as an employee and as a family member. Copyright © 2020/21 The Open College – Tutor – Marianne Byrne 21 Human Resources - Level 6 - Unit 4 6N3750 Of course, extrinsic and intrinsic factors are not clearly separate from one another, there is a complex interplay between them. The important point is that extrinsic factors affect the way people feel about themselves. How an individual reacts to his or her manager will be, in part, a function of the trust and mutual respect built up between them. As a manager, you have some control over the extrinsic factors which affect your employ- ees. Over time, these will influence the way your employees respond to you. Your history of communication with them and resultant actions taken, will contribute to their commitment, or otherwise, towards you. In their calculations - taken consciously or unconsciously many times a day – they will err on your side or not, at least partly as a result of how they have been treated by you in the past. Since most of us are in the business of generating commitment – of getting people to opt in, rather than opt out, we need to begin to understand motivation and the factors affecting it. How Does Motivation Apply in Practice? For example, if your stomach is protesting loudly that you need food, then you are likely to find reading these notes a real struggle. Your lower-order physiological needs are asserting themselves. If you are hungry, your needs for self-development temporarily take a back seat, but how does this apply to your workplace? If you make sure your workforce is getting its basic physical and safety needs met (reasona- ble working conditions, job security, etc.), what will this mean? Will this mean that employees will now be ready and willing to work with colleagues to meet corporate objectives? Clearly, life is not as simple as this. Copyright © 2020/21 The Open College – Tutor – Marianne Byrne 22 Human Resources - Level 6 - Unit 4 6N3750 Applying Maslow's model, employees are likely to work towards company goals only where these are in harmony with their own personal goals. Also, following the hierarchy to its logical conclusion, once a certain set of needs are met, the next level will be achieved. Employees will never be satisfied until they have scaled the heights of the hierarchy. Various researchers have followed up on Maslow's ideas as they apply in the workplace. Frederick Herzberg's two-factor theory is based on looking at the main factors which result in either satisfying or dissatisfying experiences at work. The assumption is that if the individ- ual is satisfied in their work, this will mean good performance, or, at the very least, a willing- ness to stay on the job. Factors leading to dissatisfaction were found to do with conditions of work – company pol- icy and administration, technical supervision, salary, interpersonal relations and physical working conditions. In other words, Herzberg’s hygiene or maintenance factors. These are a necessary minimum for a healthy workplace – they make people come into work and stay there, but they don’t necessarily encourage people to be productive. It is the other factors, the “satisfiers” or “motivators” achievement, recognition, the work itself, re- sponsibility, advancement, that encourage people to work harder. The link between motivation and performance seems to be an obvious one. If individuals are highly motivated, they will perform better. In turn, better performance may well lead to a sense of achievement and result in greater motivation. Thus, the relationship between motivation and performance can be a mutually reinforcing one. This, however, begs a number of questions to do with perception, ability and stress. Yes, motivated individuals may do more work, but this will need to be carefully managed if they aren’t going to spend most of their energy on aspects of work, they find stimulating, which may be of little or no benefit to the company. Copyright © 2020/21 The Open College – Tutor – Marianne Byrne 23 Human Resources - Level 6 - Unit 4 6N3750 Also, motivated employees need to have the requisite skills to do the job and the perception to realise whether they have them or not. Conclusion Lastly, motivation implies pressure – to move forward, to do more - but too much pressure, in other words too much stress, can be harmful in both the short- and the long- term. Of course, the answer is balance. In the short-term, we need sufficient pressure to concentrate well and do the job quickly and efficiently, but not so much that panic starts to intrude and concentration becomes difficult. In the medium- to long-term, we must avoid working to ex- haustion. Performance Management Performance management is about knowing how to manage an employee’s performance whilst at work. The reward comes when performance is acknowledged, monitored and ex- amined in detail. Armstrong and Taylor (2015) have quoted Brumbach (1988) as follows; “Performance means both behaviours and results. Behaviours emanate from the performer and transform performance from abstraction to action. Not just the instruments for results, behaviours are also outcomes in their own right – the product of mental and physical effort applied to tasks – and can be judged apart from results.” The aims of performance management According to Armstrong and Taylor (2015) “the aim of performance management is a means of getting better results by providing the means for individuals to perform well within an agreed framework of planned goals, standards and competency requirements.” Performance is really about getting the best from the employee and the employee realising that the good performer will be well rewarded. Copyright © 2020/21 The Open College – Tutor – Marianne Byrne 24 Human Resources - Level 6 - Unit 4 6N3750 Public and private sector PM Performance management has always been an essential function in the private sector. The large retail stores have used performance management in the way their employees deal with the customers. The customer then became the buzz word for all organisations. Even within departments, one department is a customer of another. In HR, our customers are the people we deal with – management, staff, etc. The public sector took longer to adjust to performance management. In fact, it took many years of talks with the various trade unions before it became part of the public service agenda. It was viewed as big brother watching. However, as the public service budget in- creased in millions of euros over the years, the government were in a stronger position to say the rewards must match the performance. A Performance Management System The right system will be tailor made to suit the organisation, supporting the company’s Mis- sion, Values and Culture. A record of the employee’s performance, normally monitored by their manager who will do a systematic review of performance against agreed criteria. There will be a mix of formal and informal. Managers need regular connection, engagement and feedback conversations with their employees as well as development and growth op- portunities. In managing performance, the manager will focus on the individual and give them an opportunity for opinion and input. The future of managing performance should be about enablement, rather than one person in control. Performance management is for everyone in the organisation. If an employee or manager do not know how they are performing, the company is not moving forward. Performance management is about goal setting and objectives which are linked to the ser- vice plan to ensure effective delivery. Copyright © 2020/21 The Open College – Tutor – Marianne Byrne 25 Human Resources - Level 6 - Unit 4 6N3750 360° Performance Management A 360° PM is about the manager setting their targets, goals etc. and the employee giving feedback as to how each project is developing. Rees and Porter (2003) define 360 degree appraisal as a process that involves the key people in a person’s network of working rela- tionships making assessments of a person’s performance. The subordinate being appraised is then given structured feedback; this may involve feedback from subordinates and any key outside parties, if it is practicable. ‘Using the 360° appraisal technique can mean there will be more negative feedback given, and this is known to demotivate staff. It is therefore vital that the managers are using the feedback received from the other raters wisely and ensure it is consistent and unbiased’ De Nisi and Griffen (2007) and Prowse and Prowse (2009). A Review/Appraisal System The Review, or Appraisal as it is more commonly called, is probably the most popular way of managing employee performance. ‘Performance Appraisal can be defined as a system that involves setting employee stand- ards, looking at employees’ actual job performance, assessing that performance against the standards, giving feedback to the employee on the performance, how to improve it in the future and setting new goals and expectations for another period’ Dessler (2008). Kumari and Malhotra (2012) defined it as “What is expected to be delivered by an individual or a set of individuals within a timeframe. What is expected to be delivered could be stated in terms of results or efforts, tasks and quality, with specification of conditions under which it is to be delivered.” Performance Appraisal plays a huge part in organisations today. A report carried out by the CIPD in 2009 found that 81.3% of organisations surveyed were carrying out performance ap- praisal in their organisation as part of their performance management. Copyright © 2020/21 The Open College – Tutor – Marianne Byrne 26 Human Resources - Level 6 - Unit 4 6N3750 Appraisal mistakes Robert Bacal (2003) cited ten common mistakes that managers make when appraising staff. Here is a summary of these points with my own comments added: 1. Appraisal is based on good communications between the manager and the staff. So, more time should be spent on preventing performance problems, than evaluating them at the end of the year. 2. Do not ever rank or compare one staff member with another, it creates bad feelings, damages morale and staff will definitely not work together as a team. The only thing it manages to do is create hostility between manager and staff. 3. Appraisal is about improvement and should never be used as a tool to blame. It should not be a “find the donkey, pin the tail” approach. 4. Ratings are subjective. No two people will rate a person with the same num- ber. Use ratings but keep this in mind. 5. Stopping appraisal when it is no longer connected to pay increases. Some companies do this when the staff are on an incremental salary scale. It is a very bad idea and reflects badly on the organisation. Appraisal is about performance and performance carries on regardless of salary increases. 6. Believing that an assessment can be carried out without actually seeing em- ployee at work or knowing what they do on a daily basis. A good example of this is a boss not knowing what volume of work his/her secretary has or what he/she is doing for her/him and never taking the time to communicate. 7. Postponing the assessment is never a good thing, no matter what urgent business is going on. It reflects badly on what management think and what priority is given to the staff. Copyright © 2020/21 The Open College – Tutor – Marianne Byrne 27 Human Resources - Level 6 - Unit 4 6N3750 8. Measuring the value of the service is easy if you are answering the phone on the second or third ring. However, much harder is measuring the quality of the ser- vice given. This is often shied away from and is more important than the trivia. 9. Not dealing with issues as they arise but noting them and hitting the staff member with it during appraisal. This is a no-no and totally puts employees off staff appraisals. 10. Thinking that all employees need to be appraised in the same way. No two people are the same and therefore must be treated differently. No one size fits all. Separation of appraisal and pay Current human resources thinking holds that it's probably best for companies to separate performance appraisals from salary reviews – at least hold them at different times of the year – and to use the appraisal discussion as a way of helping employees grow both as peo- ple and as corporate contributors. Hence, it should be much more than a report card of past performance. Though it should be acknowledged that the compensation element will always be present, to some extent, in performance appraisals, they are two separate and distinct issues, and if you do both together, staff will only hear the word money. If the employee has expectations and if the merit increase is not commensurate with those expectations, then you have a disgruntled employee. Personal development planning PDP is aimed at each individual within the organisation being responsible and achieving theirs aims for their own personal development and training plan. PDP was initiated to help employees achieve their goals. Copyright © 2020/21 The Open College – Tutor – Marianne Byrne 28 Human Resources - Level 6 - Unit 4 6N3750 Each person involved must explore their current performance as a manager or team mem- ber and identify preferred learning approaches and styles. Groups comprising of approxi- mately six people meet with their manager every four or six weeks. The purpose of the meeting is to review the experience and outcomes of the individual’s diagnosis. My opinion of this type of PM is that it is almost like coaching, but it is worked on by the individual themselves, and then the group supports their efforts. Team-based performance management (TBPM) A team-based performance management (TBPM) system is an excellent way to achieve high performers. Groups are asked to put forward ideas for projects within their department, they meet regularly, at least once a week, to review what each person has achieved. Pro- gress is reviewed at each meeting. It has the potential to match skills with roles, and short- falls are easily spotted as the group is reaching its targets. It can be linked to pay at all lev- els. TBPM works by each team deciding, based on service plans, the key priorities to be met on a yearly basis. Members are invited to contribute their ideas and suggestions to the team and then to work out ways of achieving each aim. Each team member should be given at least one day’s training. TBPM training promotes enhanced team working and ensures that the services being pro- vided are properly planned and are in keeping with the services and operational plans of the organisation. "Breaks new ground and contributes towards a change in culture. By placing an emphasis on teams and involvement of staff, the effects have been very encouraging and prove the the- ory on the positive effects of stqff participation and empowerment initiatives on motivation and discretionary effort" HSE 2006 TBPM report. Copyright © 2020/21 The Open College – Tutor – Marianne Byrne 29 Human Resources - Level 6 - Unit 4 6N3750 Clarify goals and expectations 1. Identify procedures that could be done more effectively. 2. Know and acknowledge what goals are for the coming year. 3. Acknowledge what has gone well and use this as a starting point. 4. Clearly lay out what expectations the company has of the employee for the coming year. 5. Share any known weaknesses both from the company’s point of view and that of the employee. 6. Share how these weaknesses can be overcome. 7. Always prioritise what needs to be done immediately. Evaluate the Role of Performance Management as a Motivator Monitor performance Managers must always keep an eye on what is going on. Expect failure if you think that the system is going well and does not need constant monitoring. Employees who are struggling may need coaching. Always offer support. Performance management is key to competitiveness Performance management has helped to transform the way many companies do business. By adopting practices and technology that allow them to better set and monitor perfor- mance metrics, companies and senior management can get a better read on what is hap- pening in the company, why it's happening, and what should be happening. It's all about making decisions — at every level of the organisation – with the best information. But successful performance management requires extensive integration of activities, sys- tems and communications; and unless they are efficiently managed, these resource inten- sive efforts can hamper the very goals they are designed to achieve. Copyright © 2020/21 The Open College – Tutor – Marianne Byrne 30 Human Resources - Level 6 - Unit 4 6N3750 Scoring procedures Use whatever system suits the organisation. A numeric value on a scale (as discussed ear- lier) is helpful, but always be aware that it is not objective. Not meeting expectations, meet- ing expectations, exceeding expectations, are satisfactory indicators, but really not good enough on their own. “Organisations need to eliminate performance appraisals that are an exercise in going through the motions. They need to take time to question the way things are always done and build a performance appraisal methodology that is fair and effective” Pritchard (2007). Why pay for performance? Organisations pay their employees for performance for a number of reasons: Under the right conditions, a pay-for-performance system can motivate desired be- haviour. A pay-for-performance system can help attract and keep achievement-oriented in- dividuals. A pay-for-performance system can help to retain good performers while discourag- ing the poor performers. In the US at least, many employees, both managers and workers, prefer a pay for- performance system, although white-collar workers are significantly more support- ive of the notion than blue-collar workers. But there is a gap, and the evidence indicates a wide gap, between the desire to de- vise a pay-for-performance system and the ability to make such a system work. The most important distinction among various pay-for-performance systems is the level of aggregation at which performance is defined - individual, group, and organisation–wide. Copyright © 2020/21 The Open College – Tutor – Marianne Byrne 31 Human Resources - Level 6 - Unit 4 6N3750 Historically, pay for performance has meant pay for individual performance. Piece-rate incentive systems for production employees, and merit salary increases or bonus plans for salaried employees, have been the dominant means of paying for performance. In the last decade, piece-rate incentive systems have dramatically declined because managers have discovered that such systems result in dysfunctional behaviour, such as low co-opera- tion, artificial limits on production and resistance to changing standards. Similarly, more questions are being asked about individual bonus plans for executives, as senior managers discovered their negative effects. Meanwhile, organisation-wide incentive systems are becoming more popular, particularly because managers are finding that they foster co-operation, which leads to productivity and innovation. To succeed however, these plans require certain conditions. (Taken from homeenglish.ru/refhuman.htm) Individual pay for performance The design of an individual pay-for-performance system requires an analysis of the task. Does the individual have control over the performance (result) that is to be measured? Is there a significant effort-to-performance relationship? Failure to include all activities that are important for effectiveness, can lead to negative con- sequences. For example, sales personnel who receive a bonus for sales volume may push unneeded products, thus damaging long-term customer relations, or they may push an un- profitable mix of products just to increase volume. These same salespeople may also take orders and make commitments that cannot be met by manufacturing. Instead, why not hold salespeople responsible for profits, a more inclu- sive measure of performance. The obvious problem with this measure is that sales person- nel do not have control over profits. Copyright © 2020/21 The Open College – Tutor – Marianne Byrne 32 Human Resources - Level 6 - Unit 4 6N3750 These dilemmas are constantly encountered and have led to the use of more subjective, but inclusive behavioural measures of performance. Why not observe if the salesperson or exec- utive is performing all aspects of the job well. More merit salary increases are based on sub- jective judgments and so are some individual bonus plans. Subjective evaluation systems, though they can be all-inclusive if based on a thorough analy- sis of the job, require deep trust in management, good manager-subordinate relations, and effective interpersonal skills. Unfortunately, these conditions are not fully met in many situ- ations, though they can be developed if judged to be sufficiently important. Group incentives Many of the compensation and reward systems that are in use today are based on assump- tions that have not been tested for many years. There are other alternatives that focus less on individual wage increases and introduce group incentives, such as incentives related to a common goal. Group incentives have proved to be effective in practice and employees generally like them. Pay-for-performance systems need to be closely overseen and owned by the organisation's managers i.e. not by its HR department. It is also wise to involve employees in the planning and design process of compensation schemes because this best develops in them a sense of ownership. Employees who are to be covered under proposed pay-for-performance systems can be used in focus groups or task forces to fine tune proposals. These employees will then tend to serve as valuable communication channels among their co-workers. They will be able to explain the reasons for decisions and be trusted by their colleagues. Pay-for-performance is most effective at obtaining the desired behaviours, when it is related to a management process and when it truly matches the goals of the organisation Copyright © 2020/21 The Open College – Tutor – Marianne Byrne 33 Human Resources - Level 6 - Unit 4 6N3750 Pay-for-performance systems Many pay-for-performance systems are compensation systems in which an employee's pay opportunities are indexed to the performance of the company, in addition to the individual's performance. The primary objectives for pay-for-performance systems are: To increase the profitability of the organisation. To fairly share the profits with owners, customers, and employees. To create a highly responsive open system that operates on a principle of positive reinforcement. To achieve these objectives requires the identification of key employee behaviours that drive organisational profitability and the implementation of a performance feedback/performance pay system, to provide the impetus to reach the desired ob- jectives. The design of such a system requires the removal of all performance con- straints, and the creation of an open behaviour system involving: A high proportion of performance pay relative to base pay; employees who have only a modest performance pay opportunity, along with market-competitive base pay, are not true stakeholders in the organisation. They have no significant risk component in their pay, and there is no strong motivation for behavioural change. An increase in the proportion of workers to managers; higher numbers of managers rela- tive to productive staff can create "silos" and less responsive behaviours. In comparison, self-managed personnel tend to be more productive. An enterprise-wide job enlargement and enrichment program; enabling individuals to earn more pay through their own efforts can provide satisfaction without the need to move through the ranks. Copyright © 2020/21 The Open College – Tutor – Marianne Byrne 34 Human Resources - Level 6 - Unit 4 6N3750 CIPD listing of core benefits Jean Richards of Helios Associates Ltd writing for the Chartered Institute of Personnel and Development (CIPD) in London provided the following core benefits included in typical schemes in use in the UK and Ireland: Holidays (some Irish organisations allow employees to purchase extra annual leave). Life assurance. Private medical insurance. Critical illness insurance/long-term disability insurance. Personal accident insurance. Bicycles to work scheme. Cars (for eligible staff) or employee vehicle schemes. Childcare vouchers. Dental insurance. Discounted services. Financial planning. Give-as-you-earn charitable contributions. Health screening. Home phone package. Legal expenses insurance. Copyright © 2020/21 The Open College – Tutor – Marianne Byrne 35 Human Resources - Level 6 - Unit 4 6N3750 Pension. Personal computers. Retail vouchers. Educational assistance. Travel insurance. Concierge benefits (e.g. laundry service). The variety of benefits offered is a compromise between making a wide choice available and in keeping the administration manageable. Important elements in successful implementation of flexible benefits schemes are effective communication and education. In Jean Richards study, it was believed that new schemes were more likely to succeed when introduced on a cost-neutral basis (i.e. having no overall gain to either side.) Flexible benefit offerings were, according to the survey, believed to be set to increase as new software becomes available and the cost of implementation decreases allowing more organisations to become involved. It was further commented that flexible benefits were seen as an ideal way to address diver- sity in benefits, as reinforcement of cultural change, harmonisation of reward practices, and an effective means of cost management. Copyright © 2020/21 The Open College – Tutor – Marianne Byrne 36 Human Resources - Level 6 - Unit 4 6N3750 Smaller firms in particular may need to improve their benefits packages or risk losing their best performers. Catherine Redmond, head of employee benefits at Barclay's Bank, said that investing money in benefits programmes typically helped organisations to attract and retain key talent. According to Catherine, individual benefits were also believed to add significant value to those organisations e.g. benefits such as share purchase schemes were able to focus em- ployees' attention on the organisation's share price and business performance. Comprehensive benefits packages can be of significant value to employees because organi- sations are usually better placed to secure much better deals than those available to individ- uals. Employees at the top end of the banking, financial services and IT industries in particu- lar, are able to command generous reward packages. Steve Carter, UK and Ireland managing director of financial recruitment company Robert Hall International, is quoted as saying that job-seeking candidates are now expecting more from potential employers, and especially at times of high demand they may ask the inter- viewers "if you want me, what else do I get?" Carter's viewpoint was that innovative companies need to recognise that the way forward was to offer compensation packages which allowed people to choose from a list of benefits that included a pension, more holidays or healthcare-related offerings. To a 40-year-old person the offer of a great pension could be very attractive, however, a 21- year-old high performing graduate might rather have cash. Such options did not present a large administrative burden and in addition, they enabled employers to keep better in touch with the workplace Copyright © 2020/21 The Open College – Tutor – Marianne Byrne 37 Human Resources - Level 6 - Unit 4 6N3750 Reward Management Life would be easy if the management of reward was just about wages and salaries paid to employees. Reward management according to Gunnigle, Heraty and Morley (2002), ‘repre- sents a central tenet of any organisation’s approach to human resource management’. They further state and credit Allen (2001) that ‘reward management has become especially im- portant in helping to attract and retain employees and also in influencing performance and behaviour at work’. Reward management is linked to an organisation’s strategy and forms a large part of a HR Strategy. Reward comes in various guises, the simplest form being a proper monetary re- ward for a good days work. Definition of reward systems Rewards, as in motivation, fall into two categories: extrinsic and intrinsic. Extrinsic rewards come from the organisation as money, perks, or promotions, or from su- pervisors and co-workers as recognition. Intrinsic rewards accrue from performing the task itself, and may include the satisfaction of accomplishment or a sense of influence. The process of work and the individual's response to it provide the intrinsic rewards. But the organisation seeking to increase intrinsic rewards must provide a work environment that allows these satisfactions to occur; therefore, more organisations are redesigning work and delegating responsibility to enhance employee involvement. Copyright © 2020/21 The Open College – Tutor – Marianne Byrne 38 Human Resources - Level 6 - Unit 4 6N3750 Equity and participation The ability of a reward system both to motivate and to satisfy, depends on who influences and/or controls the system's design and implementation. Even though considerable evi- dence suggests that participation in decision-making can lead to greater acceptance of deci- sions, participation in the design and administration of reward systems is rare. Such partici- pation is time-consuming. Perhaps a greater roadblock is that pay has been one of the last strongholds of managerial prerogatives. Concerned about employee self-interest and compensation costs, organisa- tions do not typically allow employees to participate in pay-system design or decisions. Thus, it is not possible to test thoroughly the effects of widespread participation on ac- ceptance of, and trust in, reward systems. The aim of reward systems Here is a list of what a company’s aims may be: It is a powerful indicator of the company’s approach to its workforce, if large bo- nuses are paid to teams rather than individuals, this will encourage team building. It serves to attract potential employees. For example, companies requiring the same calibre of worker and a company needs to be ahead of the others, naturally those offering large bonuses will outshine those who don’t. It is a good retention initiative (you will recall the list in Unit 3 under retention initi- atives). It will act as an influence on how the work gets done. Common reward – pay – methods: Time rate – related to number of hours worked. Payment by results – related to quantity of output. Copyright © 2020/21 The Open College – Tutor – Marianne Byrne 39 Human Resources - Level 6 - Unit 4 6N3750 Skill based pay – based on level of knowledge and skills an employee has. Performance related pay – based upon individual performance. Flexible benefits or packages – selection of benefits, healthcare, pension, company car, etc. Profit sharing – annual profit is shared in agreed fashion. The most commonly used payment systems are: Flat rate – most popular, fixed hourly rate or monthly wage. Flat rate plus individual or group payment – becoming more popular, good motiva- tor. Merit rating – employee receives bonus payments based on performance. Profit gain share – employee receives a bonus related to improved company perfor- mance. Piecework – paid for the work they have completed. A good example of this would be when Waterford Glass was in operation, employees were paid per piece pro- duced. Other benefits Other financial benefits can include such items as a company car, travel allowance, mobile phone, meal allowance, further education, flexi-time, gym membership, golf club member- ship, as companies want to differentiate themselves from other companies’ reward sys- tems. Copyright © 2020/21 The Open College – Tutor – Marianne Byrne 40 Human Resources - Level 6 - Unit 4 6N3750 Promotion process can also influence the culture of a company. While salary increases are welcome, sometimes they are not appropriate. People need challenges and rewards for achievement. Other areas used are: Praise for a job well done must be sincere and should be distributed equally irre- spective of performance. Genuinely acknowledging the best performance for the top ten performers, raises the bar for the weaker people. Tangible rewards such as tickets to a show or a sporting event, weekend breaks, gift vouchers, employee of the week or month, etc. This process clearly has a large subjective element, yet in practice it works well and organi- sations attain a surprising degree of consensus for the vast majority of jobs. An important aspect of this subjectivity is that what matters is how the particular organisa- tion values a job. What are the Elements of a Total Rewards System? Introduction When designing an effective compensation plan, organisations need to take into account the overall packages offered to employees. "Total rewards" is a generic term used to de- scribe such compensation and incentive packages. A total rewards system is a modern compensation strategy that incorporates a holistic view of employee remuneration. As the workforce becomes more sophisticated and demanding, and competition for the best employees increases in intensity and scope, it is more important than ever to make the company stand out as an exceptional career opportunity. Copyright © 2020/21 The Open College – Tutor – Marianne Byrne 41 Human Resources - Level 6 - Unit 4 6N3750 Implementation of a total rewards system can do much to help an organisation attract the best talent available and significantly reduce turnover. Reward types A total rewards system incorporates intangible rewards as well as financial rewards, to cre- ate an inclusive system that contributes to overall well-being and satisfaction in an employ- ee's work-life balance. Satisfied employees are more productive than unhappy employees, and modern organisa- tions must realise that it takes more than just money to make an employee truly happy. Aspects of the work experience that contribute to employees' mental, physical and emo- tional well-being must be considered when designing an effective total rewards system. Salary and benefits Salaries and health benefits are the sole components of traditional pay systems, and they must be included in any total rewards system as well. In addition to offering competitive base salaries and flexible pay options, employers should be prepared to offer employees flexible, customisable health plans to fit their individual needs. In this age of widely varied family and home situations, health-benefit plans are not easily standardised. The work experience A commitment to improving the work experience is what makes a total rewards system stand out from traditional pay systems. Common characteristics of the work experience in- clude: Copyright © 2020/21 The Open College – Tutor – Marianne Byrne 42 Human Resources - Level 6 - Unit 4 6N3750 Recognition of achievements. A pleasant corporate culture. Job design and physical work spaces. Opportunities for career advancement and skill development. A work/life balance. Advantages A total rewards system has the ability to greatly increase a company's reputation as an em- ployee-friendly organisation. This reputation will attract more qualified and experienced ap- plicants and will give leverage when competing with other firms for valuable employees. Turnover is also likely to decrease significantly, reducing training and replacement costs and allowing company to leverage the experience and skills of more long-term employees. Two studies A study conducted at the World at Work Total Rewards Conference in 2007, found that many businesses were investing heavily in total rewards compensation programmes. Two thirds of the 750 companies surveyed claim they had embraced the total rewards philoso- phy as a way to attract and retain highly skilled talent. Another study released at the Motivation Show in 2009, found that employee recognition, when used as a part of a total rewards system, increases employee engagement and productivity, adding value to their organisations. Copyright © 2020/21 The Open College – Tutor – Marianne Byrne 43 Human Resources - Level 6 - Unit 4 6N3750 Considerations According to CIPD, employers can find it difficult to implement the non-financial aspects of a total rewards system. Buy-in must be established at all levels of management, especially those closest to front line employees. A total rewards system is most effective when all managerial staff members are fully aware of your compensation initiatives and their responsibilities under the new system. Reward systems theory and reality The design and management of reward systems present the general manager with one of the most difficult HRM tasks. This HRM policy area contains the greatest contradictions be- tween the promise of theory and the reality of implementation. Consequently, organisations sometimes go through cycles of innovation and hope as reward systems are developed, fol- lowed by disillusionment as these reward systems fail to deliver. Rewards and employee satisfaction Gaining an employee’s satisfaction with the rewards given is not a simple matter. Rather, it is a function of several factors that organisations must learn to manage. This relates to what is expected and how much is received. Feelings of satisfaction or dissat- isfaction arise when individuals compare their input – job skills, education, effort, and per- formance – to output – the mix of extrinsic and intrinsic rewards they receive. Rewards and motivation From the organisation's point of view, rewards are intended to motivate certain behaviours. But under what conditions will rewards actually motivate employees. To be useful, rewards must be seen as timely and tied to effective performance. One theory suggests that the following conditions are necessary for employee motivation: Copyright © 2020/21 The Open College – Tutor – Marianne Byrne 44 Human Resources - Level 6 - Unit 4 6N3750 1. Employees must believe that effective performance (or certain specified behav- iour), will lead to certain rewards. For example, attaining certain results will lead to a bonus or approval from others. 2. Employees must feel that the rewards offered are attractive. Some employees may desire promotions because they seek power, but others may want a fringe benefit, such as a pension, because they are older and want retirement security. 3. Employees must believe a certain level of individual effort will lead to achieving the organisation’s standards of performance. As indicated, motivation to exert effort is triggered by the prospect of desired rewards like, money, recognition, promotion, and so forth. If effort leads to performance and perfor- mance leads to desired rewards, the employee is satisfied and motivated to perform again. Compensation reviews In a compensation review, the goal is to establish the employee's value to the organisation, based on their duties and responsibilities, potential, and their own financial goals. If employees have a great performance review, they're going to expect a great compensa- tion package, and that might be difficult. They may view themselves and their worth higher than the company does, hence dissatisfaction. Any number of factors can come into play in compensation reviews, including the company's economic health and how much it can prudently afford to pay, as well as the employee's skill level, responsibilities, and longevity– not only with the company, but in their current position. Some companies have a salary range for various positions that can take experience, senior- ity, and skill levels into account. Copyright © 2020/21 The Open College – Tutor – Marianne Byrne 45 Human Resources - Level 6 - Unit 4 6N3750 But increases are frequently based more on the economy and how the company's doing than on actual performance. Most leaders try to give larger increases to higher performing employees, and smaller increases to lower performers. Many still link performance appraisals to pay, but in other places it has been replaced by variable pay or profit sharing. They're fairly effective in improving employee performance. Adding commissions on sales gets better performances. The Role of Non-Monetary Reward Systems Employee motivation and performance management depend on good systems that offer both financial and non-financial (non-monetary) rewards. This performance management applies to all organisations. Constant change and high expectations are taking their toll in some organisations, as well as in industry and government generally. Sometimes this is shown in employee turnover. Many employees make a New Year's resolution to seek other employment. Many are also seeking more balance in their lives. Non-monetary rewards can be as important as monetary rewards. It is possible to develop a simple structure that overcomes the difficulties of the past yet is simple enough for everyone in the organisation to understand. This structure can be tied to a completely new performance management approach, including better performance ap- praisal mechanisms. Some industries’ remuneration systems have been dominated by the industrial relations system. Enterprise bargaining and local area work agreements, individual performance based contracts, and the effect of competition on organisational structures, have had a big impact. Copyright © 2020/21 The Open College – Tutor – Marianne Byrne 46 Human Resources - Level 6 - Unit 4 6N3750 A good rewards and remuneration system ensures that each person receives appropriate financial and nonfinancial recognition, to account for the personal contribution they are making, and the overall value of their position to the organisation. This includes: Creating and maintaining an organisational structure and culture that facilitates both employee and organisational performance. Recognising and rewarding individual and team performance, financially and other- wise, in relation to the overall contribution made. Implementing compensation systems that fairly treat and recognise all employees, regardless of their level within the organisation. This is the equity issue which in- volves matching remuneration with the contribution made, particularly where job requirements can change rapidly. The best performance appraisal system in the world will not work if it is linked to a rewards and remuneration system that employees do not trust or support. A motivated employee will achieve a great deal. A de-motivated employee will be slow, prone to error and not likely to achieve. Perception is the reality, if the current system is not working as intended, then the organisa- tion has a real problem. Copyright © 2020/21 The Open College – Tutor – Marianne Byrne 47 Human Resources - Level 6 - Unit 4 6N3750 What Role Does Job Evaluation Play? In order to put a value on a job, a job evaluation is carried out. A job evaluation is a tool used by an organisation, often by the human resources department, to identify the value of a job. It does not focus on how well an employee is doing the job. Rather, it involves exam- ining the functions of the job itself. A job evaluation allows an organisation to make well-in- formed decisions on recruitment, retention and compensation. The job evaluation exercise involves several steps that will help the organisation long into the future. It is a HR activity that tags the position to the right salary or salary scale for what the job is worth both internally and externally, with other similar organisations. The job evaluation process should include input from a variety of people within the organi- sation. This allows a full understanding of a job and its role within the organisation. “Job evaluation is a systematic and formal process for defining the relative worth or size of jobs within an organisation in order to establish internal relativities” Armstrong (2014). A job evaluation is a process to determine the contribution of a position to an organisation. It needs to be seen by both the employee and organisation as fair and equitable. Good sal- ary administration requires that employees should receive financial recognition for the con- tribution that they make, and that positions of equal value should be entitled to equal com- pensation. If organisations handle this incorrectly, or manipulate it in some way, the impact on the employee is significant. It is an attempt of assessing the relative utility of a particular job in an organisation. It deter- mines a fair wage of a job and it helps in removing inequalities in the wage system, making a comparative analysis of each job. It is sometimes confused with a job analysis, but there are many subtle differences. A JA studies every aspect of each task of the job whereas the JE is about assessing its relative util- ities/functions. Copyright © 2020/21 The Open College – Tutor – Marianne Byrne 48 Human Resources - Level 6 - Unit 4 6N3750 In the public services, job evaluations take place before any re-gradings are carried out. Each job holder, along with their manager, complete a very comprehensive questionnaire so that the grading in the public services are consistent throughout. Private companies use job eval- uations in order to establish equity and fairness both in their own organisation and those comparable externally. Examine the job functions and requirements Job functions include all of the activities conducted within the job and many other details. It should examine what the job entails, how much or how little the person in the job interacts with internal or external stakeholders, and where the job falls in the chain of command. What are the requirements of the job? Mental ability, educational requirements, levels of experience and physical requirements. Some of these details will be included in the job de- scription for the position. Determine the value of the job to the organisation Be aware of what the job holder actually does, then identify whether or not those activities are meaningful to the mission and vision of the organisation. Consider the amount of people or money the job involves managing, as well as the effects the job has on other areas of the organisation. Rank or classify jobs based on the value or benefits they present to the organi- sation. Job ranking – most common method of evaluating I will give a simple example of job ranking. This way, the person responsible can place the jobs in order of importance within the organisation, top down so to speak. Once this is done, similar jobs can be put into groups or grades. Pay levels can then be agreed upon. Copyright © 2020/21 The Open College – Tutor – Marianne Byrne 49 Human Resources - Level 6 - Unit 4 6N3750 Competence based Here the person performing the job is evaluated for their competence and skills. Titles and grades at this point are not of any significance. An example of these skills could be; commu- nication, interpersonal, technical, decision-making, teamwork, etc. Summarising motivation, performance and rewards A body of experience, research and theory has been developed about how money satisfies and motivates employees. Virtually every study on the importance of pay, compared with other potential rewards, has shown that pay is important. It consistently ranks among the top five rewards. The im- portance of pay and other rewards, however, is affected by many factors. Money, for example, is likely to be viewed differently at various points in one's career, be- cause the need for money versus other rewards (status, growth, security, and so forth), changes at each stage. National culture is another important factor. Even within a single cul- ture, shifting national forces may alter people's needs for money versus other rewards. Companies have developed various compensation systems and practices to achieve pay sat- isfaction and motivation. In manufacturing firms, payroll costs can run as high as 40% of sales revenues, whereas in service organisations, payroll costs can top 70%. Managers, therefore, take an understandable interest in payroll costs and how it is spent. The traditional view of managers and compensation specialists is that if the right system can be developed, it will solve most problems. This is not a plausible assumption, because, there is no one right answer or objective solution to what or how someone should be paid. What people will accept, be motivated by, or perceive as fair, is highly subjective. Pay is a matter of perceptions and values that often generate conflict. Organisations often emphasise compensation levels and a belief in individual pay for perfor- mance in their recruitment and internal communications. Copyright © 2020/21 The Open College – Tutor – Marianne Byrne 50 Human Resources - Level 6 - Unit 4 6N3750 This is likely to attract people with high needs for money, as well as to heighten that need in those already employed. Thus, the meaning ‘employee’s attachment to money’ is partly shaped by management's views. If merit increases, bonuses, stock options, and perquisites are held out as valued symbols of recognition and success, employees will come to see them in this light even more than they might have perceived them at first. Having heightened money's importance as a reward, management must then respond to employees who may demand more money or better pay-for-performance systems. Organisations must establish a philosophy about rewards and the role of pay in the mix of rewards. Without such a philosophy, the compensation practices that happen to be in place, for the reasons already stated, will continue to shape employees' expectations, and those expectations will sustain the existing practices. If money has been emphasised as an im- portant symbol of success, that emphasis may continue. Even though a compensation sys- tem with a slightly differen